Who’s a Real Artist? Ask the IRS
The New York Times reports felicitous news for working artists with day jobs: they can deduct the expenses associated with creating their art from their taxes, even if those expenses exceed the profits derived from the art. This is good news in the most limited of ways, because it lays bare just how difficult it is to make art profitably, and presents a victory that only a small minority of artists will likely benefit from, but still, the existence of tax benefits for fine artists takes a bit of the sting out of the usual news about tax loopholes.
In a case involving Susan Crile, a tenured studio art professor at Hunter College, the IRS asserted that her art activities were merely ancillary to her teaching, and couldn’t be treated as an independent money-making venture. (“[The IRS] agrees,” the tax court ruling reports, “that petitioner has been a successful, though rarely a profitable, artist.” Thanks, IRS!) The tax court disagreed, affirming that in fact, Crile is a real-life artist, even if only three of her 40 years as an artist were profitable.
But! This does not mean that I can start deducting the costs of cooking rice and beans and buying beer for a twenty-person band rehearsal every week.
The tax court goes to great lengths to detail just how much of a real artist Ms. Crile is, listing the many newspapers that have covered her work (the Newark Star-Ledger and the St. Louis Post-Dispatch are mentioned), the government agencies and private companies that have bought her paintings, and the many grants and accolades she has received. She also keeps extraordinarily good records of her efforts to sell art (“Early in her career she used a system commonly employed by libraries at the time–a card catalog system”).
In short, if you are critically acclaimed and average $16,000 a year in art-based income while spending considerably more each year on art creation — Crile travels to other countries to do research and keeps a studio in upstate New York — you can deduct your expenses, even when they exceed your revenues. If this is your plan, you should also plan to have access to the resources necessary to hire a white-shoe law firm to defend you against the IRS, because simply telling the IRS it is mistaken in its application of the tax code will get you about as far as citing Supreme Court search and seizure cases to a state trooper. Case in point: the IRS lost another case on essentially the same facts two years ago, but still put Ms. Crile to the trouble of going to court.
Moral of the story: being a celebrated and very successful artist is seldom profitable (with notable exceptions, of course), but may provide some modest tax benefits. So keep working at what you love, but don’t quit your day job.